10 ways to Manage Your Debtors to Improve Your Profits

1.      Do you credit check all your new customers to see whether they can actually pay you? Do you check them with one of the numerous credit reference agencies? This service is not expensive and if it reduces the risk of not being paid, it is money well spent. It won’t eliminate the risk of non or slow payment, but it will reduce it. And it shouldn’t stop with new customers; it’s worth updating the check annually on existing customers

2.      Set cautious credit limits for all customers; again credit reference agencies make this process very affordable with recommended credit limit levels. Let your client know about their credit limit along with your terms of trade. Don’t forget to state the terms of business on your invoices too. If the customer account goes over the credit limit, but them on stop and let the customer know

3.      Make sure you have a written order from the customer and make sure your invoice is accurate. Your customer will check every invoice in detail and if it’s exactly how they want it laid out with all relevant details, in accordance with the order too, it will be processed first time and if they are a large business you will be paid in accordance with the agreed terms. The customer will have no excuse for not paying you

4.      Always obtain proof of delivery or signed customer satisfaction with the service

5.      Invoice promptly. It’s a well known fact that the longer you leave it to invoice the customer, the less likely you will be paid!

6.      Keep your outstanding debtors lists up to date daily and review them weekly. Chase overdue accounts quickly

7.      Chase your overdue debtors systematically. Start by ringing and reminding gently just a few days after the debt is overdue, say 7 days; then follow up systematically. Keep a log of all your contacts and promises by the debtor. Quote these back in follow up calls. Be polite but persistent. Whatever you do don’t let it get emotional. When you issue warnings, keep your word and take action. If you use someone else to help collect your debts, make sure they are good at their job as good credit controllers are hard to find. If you find a good one, look after them!

8.      Stop the service once the debt starts to get long overdue. Let the user of your goods or service know that they are on “stop”, say 20 days after due date

9.      Consider factoring if debt collection remains slow. The big advantage of this form of financing is that it grows as the business grows. Confidential Invoice Discounting is as the title says confidential from your customers and is increasingly available to smaller businesses, although your sales ledger accounting must be bang up to date

10.  Remove the risk altogether, get paid up front! This can be done in a number of ways, including bank transfer, direct debits, standing orders, credit card payments or cheque up front. However make sure payment has cleared the bank for whichever method of payment is used. Talk to your bank to confirm

Want help or want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

 “101 Ways to Make More Profits” by Steve Pipe, 2^nd Ed., now out of print, was the inspiration for the above article

The 11 key ways to make more profits

There are hundred’s of ways to make more money; here are a few key ones:

1.      Thing long term and start planning to make more money. Profit improvement is a process and needs planning. Do you know what you plans and goals are? It is surprising how once you know where you are going, you are more likely to get there. Don’t just wait until you are in crisis

2.      Don’t just cut costs and rush to get new customers, try to get more income from your existing customers: why don’t you sell more often, or increase the value to clients by selling more services. Surely getting more income from existing customers is easier and makes more sense from a customer care angle?

3.      Have you got the right sort of customers? Do they fit your future plans? Are you going for the right mix of customers through your marketing?

4.      Review your systems systematically, the way you do things. Document them in an overview chart to get the high level picture and make sure you cover all the key systems in the business: production, production administration and general administrative support including finance. Can you do things in a better way?

5.      Ask where is the waste in your business?

6.      Ask your staff. They run the business day to day and will know best how you can make more money.

7.      Involve the staff more in the running of the business. Do you keep your staff informed? Do they feel involved and part of your future? Do they know your “Purpose”, your “Why”, the reason your business exists?

8.      Don’t underestimate the challenge of implementation. Make sure you have a structured process to making the agreed changes happen

9.      Do you truly know if you are making money? Are your financial records up to date? Do you have up to date key financial figures and also management accounts? Do you monitor trends in financial numbers? With this detailed information, you know where to take action

10.  Prepare financial forecasts. You can use these forecasts to compare how you are doing to your original plans. The exercise highlights where things haven’t gone to plan and where immediate action is required.

11.  Benchmark your business. How do you compare to your competitors? So as well as monitoring performance to internal measures including previous performance and forecasts, it is more important that you compare to independent measures which you can get from benchmarking. 

Want help or want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

The 6 Key Questions to Keeping Control of your Personal Finances

Few of us keep a regular eye on our personal finances. What are the key areas you should be watching out for?

1.      How often do you review your personal financial position?

You should do this on an annual basis. A great time to do this is at the beginning of each calendar year.

2.      How well protected are you and your family if you were to die or fall ill?

This is something everyone in work with a family thinks about constantly. What will happen to my partner/children? Another related question is what will happen to my business or my business partners (for the answer see business wills below)? There are in fact lots of different types of personal protection policies, varying as to the level of cover and cost. Income Protection is one type of protection which not many people are aware of, which covers you for losing the job you are presently doing and can compensate you up to your present net profit; it may not be as expensive as you think.

3.      What plans have you made for your retirement?

Retirement soon comes around. The earlier you start the better, but you probably do need to save more than you think to get the level of pension you want. Indeed do you know the level of pension you want? Is a pension the right answer? The answer to this latter question can vary with age. Have you considered ISA’s or other alternative investments for your retirement? If so, are these strategies right?

4.      How often do you review the performance of your pensions and investments?      

Most of us are guilty of failing to keep an eye on our investments are performing. Have you also considered how your pension is performing? In common with the answer to question 1 above, this should be done on an annual basis.

5.      Have you got a will?

Few of us want to give this any attention; it seems to be tempting fate, but the Intestacy rules can sometimes be unpredictable. If you have no will the Intestacy rules apply.

Have you thought about wills for your business? These protect you and your spouse and your business partners should you or your business partner become unable to work or die.

6.      Have you thought about inheritance tax?

Although the levels at which inheritance tax start seem high, they affect more of us that expected. Have you prepared a personal Balance Sheet? You might be surprised at the answer; it might make you feel good, but also leave you with an Inheritance Tax headache.

The importance of these questions can vary at different stages of your life; indeed, are you asking yourself these questions? Do you know the answers?

Lastly, don’t forget your own business. How would you like to exit your business? This is something you should be thinking about from starting up the business. If you don’t plan this, you could end up in the wrong place. Starting to think about this with only 2 to 3 years to go could be too late.

Why not have a chat with us, as we are completely independent; we don’t sell any financial service products.

We offer a review of your personal finances, the Wealth Tracker. Alternatively we can also help you put together your personal Balance Sheet. Knowing where you are right now and putting in a plan will help you feel in control of your future.

Want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

Planning to maximise your tax credits income if you are in business

Did you know you can plan your tax credit income if you are in business in order to minimise the income from year to year?

For example, if you are a sole trader or in a partnership you could make a capital purchase (e.g. a van) just before your accounts/tax year end. This will reduce your taxable income used for tax credits purposes, by the cost of the purchase.

Alternatively you could make a pension contribution. Again this reduces your taxable income by 125% of the actual pension contribution.

Or you could utilise old business tax losses from bad trading years in the past on the same business; also any current year business losses can be used to offset against your other taxable income or even against your partner’s taxable income (unlike for income tax where every person’s income is considered on a stand alone individual basis – for tax credits, joint income is taken).

All of these will impact on your taxable profits on which tax credits will be based. And the lower of last year’s or the current year’s income is used to calculate the tax credits figure (subject to a £25,000 disregard this tax year, £10,000 next tax year), meaning that if you have one particularly low year of taxable income, that could be used for the tax credits income figure for two years, maximising your tax credits income!

We recently helped someone to recover 98% of the full value of their capital purchase of diagnostic equipment for their new car service business; 20% tax refund, the rest, 78% from tax credits, half in the last tax year, the other half in this tax year.

Want to know more? Give us a call to see how we can help and plan to maximise your tax credit income from planning your business affairs. Contact Jan on 07890 239442

jan@sandersgeeson.co.uk

www.sandersgeeson.co.uk/html/taxcreditsplanningforbusinesses.html

Are you in business and losing out?

Could you be claiming tax credits and you don’t know it?

In my experience many business owners are losing out on tax credits.

Tax credits aren’t only just for people with children, what people know as family tax credits.

Tax credits are also for people on low income without children; these are known as working tax credits and are for people in work.

For example, you could be losing money in your business and therefore have no taxable income for tax credit purposes and possibly therefore be eligible for maximum tax credits or simply have a large drop in profits to a point where you are eligible for some working tax credits. We come across this situation all the time.

Another situation is where you have just started up in business and invested a lot of your own money in the business. This is very likely to be all allowable as a cost for tax credits purposes and is likely to generate a loss and therefore nil income for tax credits purposes.

In both the above cases you could be entitled to maximum tax credits (for a couple this could be nearly £4,800, where your partner has very low income).

Are you losing out? Get in touch if:

1. You have a very large drop in business income so that you are either making losses or very low profits, or
2. You have just started up in business and have invested a lot of money in the business

We may be able to help you generate more income for you and your business.

Want to know more?

Contact Jan on 07890 239442

jan@sandersgeeson.co.uk

www.sandersgeeson.co.uk/html/taxcreditsplanningforbusinesses.html

A Life Story, inspired by Carl Hopkins, a Secret Millionaire

I was inspired to write this piece when I attended First Friday in Wakefield last week. Carl Hopkins, best known for his appearance on Channel 4’s The Secret Millionaire, was the speaker and he is passionate about inspiring young people to get what they want through education. Carl got no help at school and despite that was a great success. He wants to help other young people to achieve success too.

It was interesting to reflect on my own experiences at school, which I‘m sure aren’t unique.

By the time I was 16 after middling performance at school, I found myself not working at all (I enjoyed going out every night with my mates) and failing nearly all my GCE mock exams. It was massively embarrassing and one of my teachers took me on one side and told me that I was wasting my life. My parents didn’t give me a hard time but from that night I started working really hard and passed all my GCE exams bar one. I started my A levels with top of the class results and went on from there, getting A/B/C/D A Level results (surprising everyone else at my school), a 2:1 in Law (despite my school careers advisor telling me that I wouldn’t be able to do Law), first time passes in the Chartered Accountancy exams (and one of the best performers in the revision class) and more recently a Distinction (first class) in an MBA at Bradford. I also had a long and successful career as a Finance Director before setting up my own business, Sanders Geeson Chartered Accountants. Not bad for a “no hoper” at 16……..

The secret – working hard, doing my own thing and never stopping learning…….as well as lots of support from my wife and parents.

I know many people think I’m mad doing all the courses and exams I do, but learning never ceases to be fun.

I also have a friend who dropped out of University after 3 days, spent 2 years working for the DSS in a basic job, then decided to go back to University. He is now a Professor in Philosophy at Nottingham University, speaking all over the world. Life is full of great positive stories….

Finally, regarding Carl Hopkins, his first assignment for JDA (his first job) was to work on the Falcon by Post (knitting) catalogue. A year later I arrived as Finance Director for the business, my first senior finance job and a big step up for me …….it’s a small world……

http://www.sandersgeeson.co.uk/

Research and Development Tax Credits

Following on from my last blog, I didn’t make it clear, but there are accountants who do advise on tax credits – cheers for them! But they are in a minority……


RESEARCH & DEVELOPMENT TAX CREDITS

Today I’m wanting to discuss another type of tax credit, Research & Development (R&D) Tax credits.

All too often this is overlooked in preparing a companies tax return.

A tax allowance of 175% (in effect an extra 75% tax deduction) is given to SME’s on their R&D spend in a financial year (£10,000 or more), which works out at a tax saving of 36.75% of the R&D expenditure for companies paying the small companies rate of 21% (usually a company with profits under £300,000). It is even possible to surrender the relief where a trading loss arises for a cash refund, albeit at a lower rate (subject to certain restrictions surrounding the payroll spend).

Staffing costs can be included along with software and consumable items and the expenditure involved must relate to the company’s trade or a trade derived from the expenditure. The company must be a going concern.

Specialist HMRC units handle R&D Tax Credits. What are the tax office looking for?

1. Projects undertaken achieve some sort of advance in science and technology; what is meant by an “advance”? An appreciable improvement in existing technology

2. In making the advance the company must be overcoming technical uncertainties (HMRC are keen on this one)

3. Projects are not readily deducible by a competent professional working in the field – practically a project should last a minimum of 3 months. One week won’t suffice!

Are you missing out on a big tax deduction?

If you wish to know more, please contact Jan on 07890 239442.
http://www.sandersgeeson.co.uk/